Embezzlement can kill a business

Richard Sawyer’s once-profitable San Marcos business went belly up this year. About 90 people lost their jobs.

The end, he said, came solely because a long-trusted bookkeeper siphoned more than $5.7 million from his Proformance Apparel Group.

“It totally ruined us,” he said.

Insider theft by an employee — often the one who controls the books — can kill a business. Or at least leave deep scars.

Sheriff’s Sgt. Mark Varnau, who spent years running a unit dedicated to investigating financial crimes, said he’s seen viable businesses fail from “nothing other than pure greed.”

“Most businesses are surprised at how quickly they can go from being in business to completely out of business. They don’t seriously consider that a trusted employee could take their business and turn it completely upside down.”

Proformance, which specialized in textile screen printing, closed in April. The owners filed for bankruptcy.

Elizabeth Ann Masters, 45, who admitted embezzling $5.7 million from her San Marcos employer during her nine years with the firm, kept her head lowered, as she stood next to her attorney, Matthew Roberts during her sentencing at the Vista Courthouse on Monday.— Don Boomer

Elizabeth Ann Masters, 45, who admitted embezzling $5.7 million from her San Marcos employer during her nine years with the firm, kept her head lowered, as she stood next to her attorney, Matthew Roberts during her sentencing at the Vista Courthouse on Monday.
— Don Boomer

Longtime company controller Elizabeth Ann Masters siphoned money from Proformance over about nine years, primarily by arranging to receive several extra paychecks each month, authorities said. The thefts started in 2003, with her second paycheck. In 2011, she secretly took home more than $1 million.

The first red flag came for Sawyer when the company, with sales of over $10 million a year, suddenly couldn’t afford to pay its taxes.

About 10 days before Masters was sentenced in April to nine years in prison, Proformance closed its doors for good. Masters will likely only have to serve half of the sentence for her white-collar crime.

In San Diego, another former bookkeeper stands accused of embezzling more than $3 million from Jack’s La Jolla dining and entertainment venue. Authorities said the thefts led the site to go out of business in 2009. Trial for the ex-bookkeeper is set for October.

Another dining spot, Leucadia Pizzeria, remains open but is still reeling from the sting of insider theft.

Authorities said ex-bookkeeper Susan Seibert swiped more than $545,000 during her four years working for the pizza chain, which has locations in Encinitas, Rancho Santa Fe and La Jolla.

Seibert was sentenced in August to four years in prison. She can probably get out after two years.

It may take at least that long for the business to recover.

In a letter to Vista Superior Court Judge David Berry, Pizzeria owner Chip Conover said the embezzlement left him with depleted checking accounts, no savings, more than $100,000 in debt to vendors and more than $230,000 in taxes owed.

The chain’s 160 or so employees “have been financially suppressed for years, and will still feel the repercussions for a few more,” he wrote.

So how does a small business turn into an ATM for an employee? Unfortunately, it’s easy, said James Ratley, president and chief operating officer of the Association of Certified Fraud Examiners, an international group based in Texas.

“So many times, the employer puts the employee in the situation that allows them to steal,” Ratley said.